This blog comes from Colorado firm Higgins, Hopkins, McLain & Roswell. Our goal is to use this blog as a means by which to share news and updates regarding construction litigation in Colorado. While we specialize in litigation of complex construction claims, including construction defect matters, we also use this blog as a platform to share thoughts and ideas regarding risk management strategies that can be implemented to minimize the risk of construction related claims.

Tuesday, September 25, 2018

In excess of 30 states have enacted tort reform legislation requiring property owners to notify construction professionals of the presence of alleged construction defects prior to the commencement of a lawsuit. These statutes also often permit construction professionals to make an offer of repair within a statutorily defined period of time after receipt of a notice of claim letter. Undoubtedly, the notice-of-claim process has played a meaningful part in bringing construction professionals and claimants to timely resolutions of construction defect concerns in isolated instances.

However, while these statutes are commonly referred to as “right of repair” legislation, their practical effect is often reduced to little more than procedural empty gestures serving as a prelude to litigation. This article will briefly survey the “right to repair” statutes in Colorado, Montana, North Dakota and South Dakota. In Nebraska, New Mexico, Utah and Wyoming there is no right to repair or notice-of claim statue.

COLORADO

Pursuant to C.R.S. § 13-20-803.5, the “right of repair” process begins when a property owner delivers a “notice of claim” letter to the construction professional. The construction professional then has 30 days to inspect the property, according to C.R.S. § 13-20-803.5(2). Upon completing the inspection, the construction professional has an additional 30 days to offer to settle the alleged construction defects by means of payment or by offering to remedy the alleged construction defects through remedial work. “A written offer to remedy the construction defect shall include a report of the inspection, the findings and results of the inspection, a description of the additional construction work necessary to remedy the defect described in the notice of claim and all damage to the improvement to real property caused by the defect, and a timetable for the completion of the remedial construction work” as stated in C.R.S § 13-20-803.5(3).

However, an owner is under no obligation to accept a construction professional’s offer of monetary compensation or repairs, regardless of how reasonable it may be based on C.R.S § 13-20-803.5(6). Recognizing the practical reality that the “right of repair” exists in name only for Colorado construction professionals, Colorado’s legislature introduced House Bill 17-1169 on February 6, 2017. HB 17-1169 would have statutorily permitted construction professionals to perform repairs in response to a notice of claim letter. In the words of the bill: “[i]f the Construction Professional [were to give] notice of an election to repair the defect in accordance with [the statute], the Claimant shall provide the construction professional with unfettered access to the subject property as necessary to correct the construction defect. . .” Unfortunately, on March 1, 2017, Colorado’s House Committee elected to postpone any vote on HB-1169 indefinitely.

In sum, in Colorado, construction professionals have the right to offer to make a repair. Owners have no obligation to accept a construction professional’s offer of repair.

MONTANA

Montana’s construction defect statute is substantially similar to that of Colorado’s. Specifically, M.C.A. § 70-19-427 requires a residential homeowner to serve a written notice of claim on the construction professional prior to the commencement of a lawsuit. The notice of claim must state that the homeowner is asserting a construction defect claim against the construction professional and must describe the claim in reasonable detail. Thereafter, the construction professional has 21 days to respond to the homeowner by proposing an inspection of the property, offering to compromise or settle through a financial settlement or repair, or denying liability. As with Colorado’s statute, the homeowner is under no obligation to accept a construction professional’s offer.

Additionally, M.C.A. § 70-19-427(3)(b) allows the homeowner to reject the inspection proposal. Nevertheless, if the homeowner elects to allow the construction professional to inspect the property, within 14 days following the completion of the inspection, the construction professional is obliged to provide the homeowner with an offer to compromise via a monetary payment, a written offer to remedy the claim through a combination of repair and monetary payment, or a written statement setting forth the reasons why the construction professional will not proceed to remedy the alleged defect. The homeowner must then, within 30 days, accept or reject the construction professional’s proposed resolution. If the homeowner rejects the offer of repair or settlement presented by the construction professional, the homeowner must serve written notice of the homeowner’s rejection to the construction professional. After delivery of the homeowner’s rejection of the proposed settlement, the homeowner is free to commence a lawsuit against the construction professional.

NORTH DAKOTA

North Dakota’s statutory construction defect notice and offer of repair requirements are unique compared to the foregoing states. Specifically, N.D.C. § 43-07-26 precludes residential homeowners from undertaking any repair, other than emergency repairs, or commencing a lawsuit prior to providing notice to the construction professional of the alleged defect. Thereafter, “within a reasonable time after receiving the notice, the contractor shall inspect the defect and provide a response to the purchaser or owner, and, if appropriate, remedy the defect within a reasonable time thereafter,” according to N.D.C. § 43-07-26. Compared to the language of the other states examined in this article, North Dakota has, by far, the most favorable statutory regime for construction professionals. The homeowner must allow the construction professional to inspect the property and the construction professional is actually afforded the “right to repair.”

SOUTH DAKOTA

Pursuant to S.D.C.L. § 21-1-16, South Dakota maintains a statutory regime requiring residential homeowners, prior to commencing an action, to serve a written notice on construction professionals setting forth the alleged construction defects present at the property. Additionally, the statute requires that the residential homeowner allow the construction professional to inspect the property within 30 days after service of the notice and allow the construction professional to make a written offer to repair or an offer of monetary settlement. While the homeowner is under no obligation to allow the construction professional to perform the repair offered, if any, the homeowner is required to wait until 30 days after the notice of claim is served on the construction professional or until the construction professional refuses to remedy the alleged construction defect prior to commencing suit.

CONCLUSION

The statutory right to repair for construction professionals is often an illusory remedy under the current statutory framework. While the legislative intent in enacting construction defect reform statutes was presumably to streamline construction defect litigation, these right-to-repair provisions are often rendered ineffective as a result of property owners’ ability to refuse reasonable repairs.

For additional information regarding the construction professionals’ “right to repair" or about construction defect litigation in Colorado, generally, you can reach Jean Meyer by telephone at (303) 987-9815 or by e-mail at meyer@hhmrlaw.com and/or Sheri Roswell by telephone at (303) 987- 9812 or by e-mail at roswell@hhmrlaw.com.

Thursday, September 6, 2018

On July 12, 2018, the Colorado Court of Appeals announced
its decision in Lopez v. City of Grand Junction, 2018 WL 3384674 (Colo.
App. 2018). The Court considered whether immunity is waived under Colorado’s
Governmental Immunity Act (“CGIA”), pursuant to section C.R.S. §
24-10-106(1)(f), in situations where the public entity hired an independent
contractor to perform the work. The Court held that if the public entity would
have been liable under the CGIA for the conduct that caused the injury, had it
performed the work itself, then it is liable for the work performed by its
independent contractor.

While the CGIA provides immunity to the government, pursuant to C.R.S. §
24-10-106(1)(f), the government waives immunity for injuries resulting from the
operation and maintenance of any public sanitation or electrical facility. The
City of Grand Junction contracted with Apeiron Utility Construction (“Apeiron”)
to perform maintenance of a public traffic light. During such maintenance,
Apeiron breached a natural gas line that leaked into a sewer main located
nearby. The gas migrated to the plaintiffs’ home and entered the basement,
resulting in an explosion and injuries.

The city filed a motion to dismiss for immunity under the CGIA and the
plaintiffs argued that the city waived its immunity under the CGIA because the
explosion resulted from the operation and maintenance of a public sanitation
facility. The trial court held a Trinity hearing and granted the city’s
motion to dismiss. See Trinity Broadcasting of Denver, Inc. v. City
of Westminster, 848 P.2d 916 (Colo. 1993) (holding that a court may hold a Trinity
hearing where the injured plaintiffs bear the burden of proving the court’s
subject matter jurisdiction under the CGIA and that immunity has been waived). Tidwell
ex rel. Tidwell v. City & Cty. Of Denver, 83 P.3d 75, 85 (Colo. 2003).
The Court of Appeals reversed in part, and affirmed in part, holding:

1. Reversed—the
waiver of immunity applies even if the operation or maintenance was performed
by an independent contractor.
2. Affirmed—the
dismissal of the negligence claim as to the city’s operation and maintenance of
its sewer line as the evidence did not support an immunity waiver.

Waiver of Immunity for Work Performed by Independent
Contractor

The Court of
Appeals relied upon Springer v. City & County of Denver, 13 P.3d 794
(Colo. 2000). The CGIA establishes governmental immunity from suit for public
entities and their employees in tort cases, but also waives immunity in certain
circumstances. C.R.S. § 24-10-106; Springer at 792. The Court in Springer
reviewed three aspects of section 1(c) of the CGIA and determined:

1. A public entity
lacks immunity when it creates the acts, as well as its omission, in failing to
reasonably discover and correct an unsafe condition. Id. at 801.
2. If the CGIA
waiver were construed to exclude the acts or omission of the independent
contractor, a public entity could avoid responsibility by contracting out its
work to others, nullifying the purpose and effect of the waiver. Id. at
801-2.
3. The General
Assembly’s intent, to hold a public entity responsible for the acts of its
independent contractor, is consistent with longstanding principles of tort
lability. Id. at 802 (citing Restatement (Second) of Torts § 422
(Am. Law Inst. 1965).

The Court of Appeals noted, “[A]s a logical matter, any attribution of
Apeiron’s conduct to the City will only matter—for purposes of waiver—if the
conduct would have waived the City’s immunity had the City itself committed
this act.” If so, the city’s immunity is waived if plaintiffs can show the
injuries resulted from the specific conduct. See C.R.S. §
24-10-106(1)(f); Tidwell at 86. This does not require a showing that the
injuries were “caused by” the conduct. Tidwell at 86. Rather, there must
be at least a “minimal causal connection’ between the injuries and the
specified conduct. Id. The trial court found, by way of the undisputed
facts, that the injuries resulted from the conduct of Apeiron striking and
breaching the gas line. As such, this conduct would have waived the city’s
immunity had the city itself committed this act.

While a person hiring an independent contractor is generally not liable for the
negligence of the independent contractor, there are widely recognized
exceptions to this rule, such as when a public entity retains possession of its
premises during the contractor’s performance of its work on the premises. See
Huddleston ex rel. Huddleston v. Union Rural Elect. Ass’n, 841 P.2d
282, 288 (Colo. 1992); Restatement (Second) of Torts § 422. Another widely
recognized common law principle of liability attributed to the conduct of the
independent contractor to the employer is when the maintenance is inherently
dangerous. Restatement (Second) of Torts § 427. The city did not dispute
that it retained possession of the property during Apeiron’s work, or that the
work was inherently dangerous. Thus, the independent contractor
exceptions applied.

The Court reversed, finding the city would have been liable for the alleged
injuries under the CGIA had it performed the work itself. Thus, immunity
was waived under the CGIA in this instance.

Operation and Maintenance of the Sewer System

Plaintiffs argued that the sewer
main was not in the same general state of repair as when it was installed.
Plaintiffs contend that roots had grown into the sewer main creating gaps for
the gas to enter. C.R.S. § 24-10-106(1)(f) waives immunity if the injury
results from the public entity’s failure to keep the public facility “in the
same general state of being, repair, or efficiency as initially constructed.
C.R.S. § 24-10-103(2.5).

The trial court found that at the time of the explosion, the sewer main was
intact and in good condition, and functioned at or near the same efficiency in
2013 as it had been when installed in the 1940’s. The Court of Appeals deferred
to the trial court’s factual finding, citing City & County of
Denver v. Dennis, 418 P.3d 489 (Colo. 2018) (“On review, we defer to the
district court’s factual findings unless they are clearly erroneous and
unsupported by the record”). As the Court of Appeals did not find the factual
findings erroneous and unsupported by the record, the Court affirmed the trial
court, finding Plaintiffs did not meet their burden to prove a waiver under
C.R.S. § 24-10-106(1)(f).

Conclusion

We believe Lopez to be
potentially problematic for contractors hired by governments in situations
where they have agreed to indemnify the governmental entity for claims arising
from their work. In those situations where the CGIA will not apply,
contractors cannot rely on it to shield them from ultimately liability to the
governmental entity. With this in mind, this opinion was not released for
publication as a petition for rehearing or a petition for certiorari in the
Colorado Supreme Court may be pending. Thus, the Colorado Supreme Court may
review this opinion.

For additional information
regarding Lopez v. City of Grand Junction or about construction defect
litigation in Colorado, generally, you can reach Frank Ingham by telephone at
(303) 653-0046 or by e-mail
at ingham@hhmrlaw.com.

Disclaimer

The information contained in this blog is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.

About the Firm

Higgins, Hopkins, McLain & Roswell exists to embody and exemplify the principles of service and stewardship. In everything we do, we focus on serving our clients selflessly and to the best of our ability. In doing so, we always have in the forefront of our minds our obligation to act as the stewards of our clients’ trust, confidences, and resources. We are highly regarded for our expertise in construction law and the litigation of construction claims. We represent a wide variety of clients, from individuals, to small businesses, to Fortune 500 companies.